Mortgage rates have hit a 23-year high, but that's not stopping some people from buying homes. In fact, the housing market is still favoring sellers, thanks to a lack of inventory.
Jessica and Matt Geren are one of the couples who recently bought a home, despite the high mortgage rates. They were motivated to move because of their husband's return to office mandate. In order to make the math work, they had to take out an adjustable-rate mortgage
The lack of housing inventory is keeping home prices high. In August, total housing inventory was down 14% from one year ago. As a result, buyers are competing with each other for a limited number of homes, which is driving up prices.
The Gerens were fortunate to have equity in their previous home, which they were able to use to help finance their new home purchase. However, for others who don't have a pressing need to move, giving up a low mortgage rate is a big issue.
One reason for the limited supply of homes is the sub-5% mortgage interest rates that 85% of current mortgage holders are locked into. This discourages current homeowners from selling their home and buying another at today's elevated interest rates.
It's hard to be a buyer in today's housing market, especially if you're a first-time buyer. With low inventory and high prices, buyers need to be prepared to act quickly and make competitive offers.
Here are some tips for homebuyers in a seller's market: – Get pre-approved for a mortgage before you start shopping. This will show sellers that you're a serious buyer and that you have the financial means to purchase a home.
– Be prepared to act quickly. Homes are selling fast in a seller's market, so you need to be ready to make an offer as soon as you find a home you love. – Make a competitive offer. This may mean offering above the asking price or waiving certain contingencies.
– Be flexible with your move-in date. If you're willing to be flexible with your move-in date, you'll have more options to choose from.
To get pre-approved for a mortgage, you'll need to provide the lender with information about your income, debt, and assets. The lender will then use this information to determine how much money you're qualified to borrow.
Here are some tips for making a competitive offer in a seller's market: – Offer above the asking price. – Waive certain contingencies, such as the home inspection contingency.
– Be flexible with your move-in date. – Include a personal letter with your offer. This can help you stand out from other buyers and show the seller that you're serious about buying their home.
Adjustable-rate mortgages (ARMs) can be a good option for buyers who are looking for a lower initial monthly payment. However, it's important to understand the risks involved before taking out an ARM.
Pros of ARMs: – Lower initial monthly payment – More flexible term
Cons of ARMs: – Interest rate can adjust up or down – Monthly payment can increase – Risk of negative amortization
The housing market in 2023 is challenging for buyers, but it's not impossible to find a home. By being prepared and following the tips above, you can increase your chances of success.